Mariko Gordon: Investment Detective When it Comes to Buying Stocks

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Nov 17, 2014
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Mariko Gordon (Trades, Portfolio), founder and CEO of Daruma Capital Management, comes from a family of hard workers that do the impossible.

Gordon's grandfather on her father's side of the family went from messenger boy to partner in a brokerage firm. He also earned a law degree along with a seat on the New York Stock Exchange with an 8th grade education.

In 1995, Gordon created Daruma, where she used skills inherited from working at Royce & Associates and Manning & Napier.

Daruma's philosophy follows strict guidelines on how stocks are managed:

  1. The firm does not allow portfolios to exceed 35 stocks or fall below 25 stocks because too many stocks will dilude the imapct of the best ideas, and too few allows the portfolio to become too volatile.
  2. The best time to buy is not only when a stock offers good value but also when what will drive the price higher is evident. Ex: expected sales, earnings or cash flow growth
  3. Companies that are inexpensive but changing for the better
  4. Do not solely rely on numbers. Conference call transcripts will give more information, such as changes in how the company is being run, which may not show up on the financials. Transcripts also give information on any changes in management.
  5. Digging into past financial history will give a better understanding of a company's business model.
  6. Follow the rule, "every stock must earn its keep," meaning if a stock is significantly down, it is crutial to buy more or sell within the 90-day period because this gives more time to wait for key data or offers more time for research.

Some of Gordon's latest stock purchases include: Lumber Liquidators Holdings Inc (LL, Financial), Constant Contact Inc (CTCT, Financial), Acxion Corp (ACXM, Financial) and WellCare Health Plans Inc (WCG, Financial).

Lumber Liquidators Holdings Inc (LL, Financial)

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This chart shows Price at P/S in relation to Price at P/B

Lumber Liquidators Holdings Inc is a United States retailer company of hardwood flooring that includes prefinished premium domestic and exotic hardwoods, engineered hardwoods, unfinished hardwoods, bamboo, cork and laminates.

Latest news: A lawsuit has been filed against the company by Levi & Korsinsky, a national firm specializing in financial fraud, claiming that Lumber Liquidators violated federal securities laws by withholding information about the quality control requirements that were implimented by the company would negatively affect its supplier network as well as revenue, earnings, or margins.

Stock price: $53.73

Down by: 2.68%

Why we think this is a good investment:

  • The company has no debt

What we think investors should watch out for:

  • High short interest
  • The company is building assets faster than revenue growth rate, indicating inefficiency

Constant Contact Inc (CTCT, Financial)

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This chart shows revenue in relation to net income

Constant Contact Inc provides online marketing tools for small businesses/organizations and non-profits. Customers are able to launch and monitor marketing campaigns across multiple channels.

Recent news: Constant Contact released new survey data that shows 73% of the small businesses that were surveyed believe data can help make theur businesses grow. Only 60% of the businesses surveyed use Big Data as a tool, mainly because of uncertainty.

Current price: $34.38

Down by: 0.84%

Why we believe this is a good investment:

  • Piotroski F-Score is an 8
  • No debt

What we think investors should watch out for:

  • Company is building assets at 61.8%, faster than revenue growth rate of 18.7%

Acxiom Corp (ACXM, Financial)

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This chart shows revenue in relation to net income and includes estimates

Acxiom Corp is an enterprise data, analytics and software-as-a-service company that serves clients from locations ranging from the United States, to Europe, South America and the Asia-Pacific region.

Recent news: The company recently hired three new members to its team: Peter Davis is now the vice president of global consulting and analytics, Chris Polishuk is the West Coast group vice president and David Conalle is the head of Digital Impact.

Current price: $18.42

Down by: 0.78%

What we think investors should watch out for:

  • Low Piotroski F-Score of 2
  • Operating margin has been on a steady 3.8% decline for the past 5 years

WellCare Health Plans Inc (WCG, Financial)

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This chart shows gross profit in relation to revenue

WellCare Health Plans Inc provides government-sponsored health care programs.

Recent news: The National Committee for Quality Assurance (NCAQ), responsible for evaluating the quality of health plans provided to members, has awarded an accrediation status of Accredited to the Medical health plan WellCare's Missouri Care health Plan offers.

Price of stock: $70.19

up by: 2.01%

What we think investors should watch out for:

  • The company's gross margin has been in long-term decline by 1.2%
  • Assets at 19.4% are building faster than revenue growth rate of 8.8% over the past 5 years